Merger with CenturyTel may be good news for Qwest customers

By Greg Griffin
The Denver Post

April 25, 2010

The combination of CenturyTel and Qwest may have benefits for Qwest customers in the form of streaming television, better access to high-speed Internet and more bundled services, analysts said.

CenturyTel has a stronger balance sheet and a better track record at investing in its network, said Stifel Nicolaus analyst Christopher King. That should translate into consumer gains, although it won't happen immediately, he said.

"Over the long term you will see more investment in the telecom plant, the DSL footprint, DSL availability and maybe higher speeds," King said. "CenturyTel has deeper pockets than Qwest."

The companies Thursday announced a $22 billion merger, with headquarters in Monroe, La.

CenturyTel, which does business as CenturyLink, is running trials of an Internet-based television service known as IPTV in LaCrosse, Wis., Columbia, Mo., and Jefferson City, Mo. The service requires the expensive buildout of fiber-optic cables into neighborhoods.

"The scale and reach of the combined company should allow us to more effectively pursue growth opportunities in wireless and data hosting, IPTV and other areas," CenturyTel chief executive Glen Post said in a conference call with analysts Thursday.

Qwest CEO Ed Mueller said the merger has benefits for consumers.

"We believe that there are significant opportunities here to drive new products and services to customers," he said. "Over time we'll look at the potential of rolling out IPTV."

Qwest currently has a partnership with DirecTV to bundle television with its services.

Consumers could see more immediate gains in high-speed Internet access if Qwest chooses to increase its DSL network investments during the 12-month period before the sale closes, said Denver analyst Donna Jaegers of D.A. Davidson & Co.

Trimming costs and meeting Wall Street's financial expectations may have limited how much the company could invest until now, she said.

"They could speed that up now that they don't have Wall Street looking over their shoulder so closely," she said.

Another improvement customers may see is better customer service, she said. CenturyTel has better systems for tracking what services its customers use, and using that information to provide better service and to market new services, she said.

CenturyTel already has about 77,000 phone-line customers in Colorado that it acquired when it bought Pacific Telecom in 1997. Ironically, Pacific Telecom had acquired those customers from U S West, the phone company that Qwest bought in 2000.

Colorado Public Utilities Commission spokesman Terry Bote said CenturyTel is in good standing with the commission and does not have unusual levels of service-quality problems or complaints.

From a business standpoint, CenturyTel appears to perform better than Qwest in Colorado. The company reported average net income per line of about $157 over the past 10 years compared with Qwest's $121, according to documents filed with the PUC. Its basic local residential and business phone rates, however, were generally lower.

Greg Griffin: 303-954-1241 or ggriffin@denverpost.com